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Equilibrium prices and trade under ambiguous volatility

Beissner, Patrick


This article considers general equilibrium economies with a primitive uncertainty model that features ambiguity about continuous-time volatility. For the resulting non-equivalence of priors, an appropriate commodity-price space is introduced. Agents are heterogeneous in the size of captured ambiguity, endowment and preference for risk and ambiguity. Preferences are of variational type à la Maccheroni et al. (Econometrica 74(6):1447–1498, 2006). One important implication involves a problematic...[Show more]

CollectionsANU Research Publications
Date published: 2017
Type: Journal article
Source: Economic Theory
DOI: 10.1007/s00199-016-0979-y


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